Central Map ..... Initial Map ..... USA Map ..... Australian Map ..... International Map ..... Corporate Practices Map..... (to print)
Home ...... Corporate Practices

The Story of Health Care Reform

A historical understanding of the limits of markets has been replaced by a fundamentalist belief in their all encompassing validity and universal applicability. As a consequence market "reforms" have been imposed on health care with unfortunate consequences. Each failure has been met by imposing an increasingly complex more marketlike model. Not surprisingly the unfortunate consequences have multiplied.

Recent History of the Market

Market theory triumphant:- With the collapse of communism and the discrediting of socialism any criticism of right wing thinking is discredited by the establishment. As a consequence there is a world wide ascendancy of extremist right wing market ideology. Multinational corporations range supreme and the leaders elected by the people pay court to them bidding for favours with tax payers money. The democratic process is increasingly becoming subservient to corporate interest.

Competition and self interest are seen as the driving force for individuals and for society. Social responsibility, a sense of community and responsibility for others become increasingly irrelevant. Human activity is interpreted as primarily self interested. Motivation for anything other than personal gain is discredited. Objectives are attained by encouraging self interest and offering incentives.

While promoting self interest as the driving force in society true believers have attacked others for being self interested and uncompetitive. Lip service is paid to social objectives.

All sectors of society are subjected to competition theory and market principles. Society is being restructured as a series of marketplaces where self-interested groups compete for wealth. Desirable outcomes are attained by manipulating the structure of the market and its incentives.

Consequences:- Society with its rich, complex, cooperative and intersubjective structures is sacrificed in the name of economic well being. The theories claim markets will lead to increased wealth for all the worlds citizens. Instead it has enriched the rich further and made the poor poorer. It has alienated large sectors of society and it is losing credibility.

The public find themselves marginalised. The delegated responsibility of their elected representatives to provide them with services central to the operation of the state is attacked as inefficient, cumbersome and costly. This is certainly partly correct. The market claims to solve these problems by contracting services to the market. So far there is little evidence of overall benefit.

We seem to have swapped something, which for all its frustration's we could trust for something which has built in pressures to misuse the citizens it serves. To address its deficiencies it requires ever more complex modelling as well as costly and continuous surveillance.

The society we live in, is being downsized in the interest of a upsized corporate elite. The thinking behind this is out of step with a new cross generational move in society for members of the public to be more directly involved in structuring their own lives, and for simplicity and relevance. Citizens see technology and globalisation as tools for this process and not for the establishment of a corporate global hegemony. This is a revolt against manipulative practices and a desire for a more civil society. The public have been deceived and they know it. There is ample evidence of deceptive or fudged accounting1.

(1. see reports by Auditor Generals in NSW and West Australia. Also BMJ ??)

Addressing Market failure:- When conventional market structures fail then complex theoretical structures are constructed. These manipulate the market process to correct perceived deficiencies in the application of market principles and make it more competitive. These new structures are thrust onto noncomforming sectors of society. That market principles themselves are not applicable is never entertained by true believers. Good examples in health care are managed care and the model recently promoted to the World Bank.

Legitimising concepts:- Underpinning the idea of the market are the concepts of a level playing field and of an informed customer able to shop around. Like all fundamentalist all embracing ideologies it is obvious that neither is valid across all of society. They apply to a greater or lesser degree in different contexts.

The market works if its limits are understood:- For all its flaws, inequalities and deceptiveness the market is the best system we have devised for many of the transactions in our society. As one of the structures of society it serves us well in those sectors of society where commercial self-interest is legitimate. In the past its weaknesses and deficiencies have been widely recognised. By limiting or tailoring its application in different sectors of society its deficiencies have been circumvented or countered. As the latest and hopefully the last of the all embracing ideologies of the modern era weaknesses and deficiencies are no longer recognised. Everything is made more marketlike.

History of the Health Care Marketplace

The Nature of Health Care:- Health and aged care are essentially cooperative endeavours to bring help and succour to members of society who are in need. They have been based on mutual trust, a sense of responsibility to one another, and an obligation to society. Health and aged care go to an intimate level of our being and to the most humane aspects of our human society. The threat which self-interest poses to these motives and therefore to those ill and vulnerable has been recognised for over 2000 years.

Health care becomes a market:- In a market oriented society self-interest is made legitimate and not surprisingly problems appeared in health care, particularly in those societies which were most market orientated. Instead of examining the context leading to the problems market theorists responded by attacking the professions for being self interested. The professional structures designed to protect people from exploitation were claimed to be anticompetitive, not sufficiently marketlike, and self serving. Businessmen set about dismantling professional structures. In their place they have imposed ever more complex systems to make health care more market like and force the medical profession to conform to market principles. Reagan's adviser Joseph Califano was particularly vocal in his criticisms of professionalism and as recently as February 2000 Samuel expressed the same sentiments.

Becoming more and more marketlike:- The market solutions have come in layers. First corporate provider medicine and then corporate restricter medicine, called managed care. The use of incentives and the pressures of competitive market forces have been increased with each new market system. Not surprisingly this has been accompanied by a parallel increase in the problems of fraud and the misuse of patients for personal profit.

More recently Healtheon has set up another ever more complex internet system to increase competitive pressures and correct the problems of managed care. Like Graeme Samuel in his speech to the World Bank, Healtheon claims that market practices have worked elsewhere and there is no reason why they should not work in health care.

The Corporatisation of Public Health Care:- Outside the USA most care is paid for and provided by government. Theory has centred on contracting the care of public patients to private corporations as this was claimed to be more efficient and to be more cost effective. Both assumptions are untrue. This has not worked well in Australia and the chairman of our National Competition Council has designed a more complex competitive market place model for contracting with government. This is based on the principle of "maximising reliance on market forces and the need to ensure enhanced competition".

Selling Health Care Reform 

The reform process as articulated by Wooldridge and Samuel follows the economic prescriptions of those who have sought to reform the health system in the USA. These ideas and these prescriptions are expressed and enthusiastically marketed by "international health care consultants". These are people who make their living by selling international opportunities to US corporations and then marketing these corporations to politicians in other countries. These politicians have little knowledge of the US health care system and are conned into buying the health care "products" being marketed. These consultants make no secret of the fact that there are enormous profits to be generated by "playing on politicians pain" and then presenting corporate solutions to the politician's health care problems.

These people are little more than articulate con men. Our health ministers, particularly Wooldridge federally, Knowles in Victoria, and Armitage in South Australia were all particularly gullible. We were sold a series of pups. The government in Western Australia was still publicly supporting Tenet/NME two years after its own health department had advised it to legislate to remove hospital licences and after the federal government had bowed to evidence and forced the company to sell up.

Examining the product

It is important to understand the sort of system which has developed when the principles espoused by Wooldridge and Samuel have been applied in health care. We should understand very clearly what is actually being sold. It is particularly unfortunate that Samuel should make this speech at the same time as the failure of health care in the USA has reached a crisis. Companies in trouble because of unsavoury practices in the USA will be looking for international opportunities.

The Current Crisis in US Healthcare:- The US government has clamped down on the misuse of medicare so cutting into the main source of health care funding - the backbone of the corporate system. At the same time there is a massive crack down on fraud which has been very profitable in the past. An angry outcry by the public and a number of politicians incensed at the consequences of the sort of policies advocated by Wooldridge and Samuel has resulted in an extremely bad press.

State and federal regulators have once again been shown to be ineffective. They have been heavily criticised. This has stimulated one of the periodic and transient bursts of feverish activity by regulators. Under intense press scrutiny regulators are attempting to show they are doing something about their past failures. Substandard facilities are actually being closed, fines are being imposed and the companies are being made to pay the fines.

The exposure of corporate misconduct has been accompanied by an escalation in legal activity. In aged care this has become a greater threat to corporate profits than patient protection legislation or oversight procedures. State attorneys in Texas and some other states have taken steps to put an end to unsavoury practices which boost the bottom line at the expense of patients.

The public and the judiciary are particularly angry at the legal protection given to HMO's by the ERISA legislation. They have battered at the door and are forcing their way past this. The same lawyers which took on the tobacco companies have commenced a series of class actions against the largest HMO's across the country. These threaten their viability and have sent share prices tumbling.

Where individuals have found loopholes in the ERISA legislation juries have expressed the public's frustration by awarding massive fines (eg $120 million against Aetna). The appeal courts have upheld this. Senators Moncrief and Zaffarelli, and attorney general Morales in Texas first opened up the Pandora's box of Tenet/NME's practices in 1991. They have continued to lead state efforts to deal with health care problems. Morales commenced the fraud action against most of the large HMO's in the state because of alleged illegal dealings with the medical profession. This has forced Aetna to make major changes to its practices across the country.

As a consequence of all this business confidence in health care is evaporating. Several of the major nursing home corporations have entered bankruptcy and the various governments are faced with the potential prospect of having to take over and run homes containing many thousands of helpless people to prevent them from being thrown on to the street. Share prices on Wall Street are tumbling.

The Extent of the Problems

The problems which have emerged in the health care market are not isolated events or minor aberrations. People, the citizens have been exploited, misused and abused for the benefit of other citizens and to massively defraud the country they live in. This has occurred on a massive scale across every sector of health care. The largest, the most important and the most credible pillars of the establishment have been the prime offenders. It challenges the fabric of US society, ideas about the sort of society the US really is. It is not possible to blame individuals or particular aberrations or even to claim that it is because it is insufficiently marketlike. Yet this is exactly what the world establishment continues to do.

What is exposed is the true nature, the ruthless calculating inhumanity, the total self centred concentration of the unrestrained market processes. There is of course nothing new about this. The market has behaved like this whenever it has been unleashed. Look at the slave trade. More important is to recognise the total failure of formal structures. Regulation and policing have had no impact. They have failed where in the past simple pressures in the community have worked.

This experience restates the centrality and power of social processes in human communities. I am talking about the informal pressures in society generated as we interact with one another - social capital. It raises questions about the great reliance in our society on formal regulatory processes and questions the ability of these cumbersome structures to enter into and address the nuances of individual life experiences.

Escaping to the International Market

In response to impending adverse events in the USA corporations have in the past rapidly established international operations in order to support and cushion the companies. Tenet/NME, Columbia/HCA and Sun Healthcare have all done this. Australia has been one of the countries they targeted.

The citizens in most developing countries are not worldly wise in a health sense and are far more vulnerable to exploitation than US citizens. The prospect of letting these corporate groups loose in the inexperienced and largely unmonitored developing world is terrifying. International administrators will be under extreme pressures from US board rooms to generate the funds to support US failures. The US experience shows what will happen.

That anyone could credibly consider that groups like these will embrace humanitarian ideals and provide equitable services across the whole spectrum of the underprivileged in a distant country is ridiculous. I consider Samuel's speech to the World Bank be a rationalisation for economic health care vandalism. The problem is that some may have been impressed by the words.

Central Map ..... Initial Map ..... USA Map ..... Australian Map ..... International Map ..... Corporate Practices Map..... (to print)
Home ...... Corporate Practices
This page created April 2000 by Michael Wynne